ore than a year after Fort Point Channel water flooded a Big Dig work zone, halting work there for more than three months, the Turnpike Authority yesterday completed a legal settlement worth more than $34 million to cap its losses.

The settlement prevents any future increases on the state's contract with Modern Continental Construction Co., which built the trouble-plagued Fort Point Channel tunnel crossing, said Turnpike spokesman Sean O'Neill.

Modern won the contract in 1997 on a bid of $301 million, and the pact had grown to $383 million. With the settlement, the state's total bill is now $417 million, an increase of nearly 39 percent over the original contract price.

The leak is one reason the Turnpike's extension to Logan Airport, which was supposed to open in September 2001, will not open until Jan. 20 at the earliest.

Charles Madden, Modern's executive vice president, said yesterday's settlement "satisfied both the Commonwealth and the contractor."

The concrete tunnel tubes that span the narrow Fort Point Channel near Gillette Co.'s world headquarters had sprung small, persistent leaks throughout the summer of 2001. In September of that year, the water began gushing in at up to 70,000 gallons a minute, submerging heavy equipment and stopping construction for months.

Before the flood, Modern and the state had come to a tentative settlement for outstanding claims for extra money.

The leak changed all that and the settlement was scrapped, Madden said, initiating a new round of negotiations.

Earlier this year, the Turnpike's general counsel, Michael Powers, asked the state attorney general's office to investigate $3 million of Modern's claims, saying they might violate the state's False Claims Act.

O'Neill said yesterday the state has decided not to pursue the case. Asked whether the claim referral was a bargaining tactic against Modern, O'Neill said it was an attempt to ensure that contractors substantiate financial claims.

Beth Stone, a spokeswoman for the attorney general's office, confirmed there would be no investigation but did not provide specifics.

Despite the size of yesterday's settlement, O'Neill said the Big Dig's budget of $14.625 billion included room for the deal. He called the deal a positive development for the state.

"This ends any future increases on this contract," O'Neill said. "It's a good thing."